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Good on IRD’ for ‘forcing’ SMEs to adopt technology

25 February 2019

Accounting firm says ‘good on IRD’ for ‘forcing’ SMEs to adopt technology

Resistance from Kiwi businesses opposed to the IRD’s new payroll reporting regime, which becomes compulsory from 1 April, is a symptom of ‘SME technology phobia’ and one of the reasons New Zealand’s productivity levels are so poor – but it may also force many to lift their game.

Director of Auckland-based accounting and business advisory firm, NexGen Group, Vinay Iswar, says local reaction to the new payroll regime shows how far New Zealand companies have still to go in playing catch-up with many in the OECD.

“We heard nonsense about it being a stealth tax, a waste of time and a way for the IRD to spy on what goes on within the business. One of the reasons New Zealand’s productivity is so low is because we’re not adopting technology fast enough, and the new payroll reporting regime tells us why.

“There’s a resistance to change. Many people don't want to have to learn something new. Unfortunately, fear and suspicion are very much alive in 2019, not to mention potentially an unreasonable obsessiveness with privacy.”

Iswar says that in fact the new payroll reporting regime may have an unexpected benefit.

“Forcing some SME owners – and it’s not everyone – to adopt this technology may actually show them that technology is not to be feared and that it can make a real tangible difference in terms of costs and time saving.

“If SME owners won’t adopt technology change voluntarily, they’re never going to discover the benefits for themselves. I say good on Inland Revenue for helping some business owners into the light.”

Iswar says he knows from the firm’s work that payroll and PAYE can take hours to complete for a small business, and often leads to cashflow problems because they leave their PAYE payments until the last minute.

“The reality is that many payroll providers have been doing this for years. The reports are compiled automatically and the PAYE collected on behalf of the business. They just didn’t file until it was required.

“The only real change is that Inland Revenue wants it filed automatically, online and weekly instead of monthly. This means that instead of having to come up with a big sum of money to pay PAYE all at once, businesses can spread out the payments over a month – it’s a good thing for cashflow,” says Iswar.

He says that while it’s true Inland Revenue now has real time information on your business, such as your required PAYE payment on a weekly basis, it isn’t good business to conceal information from Government; it’s information that should be declared anyway.

“The new payroll reporting regime is a nice, systematic way to pay your people and it’s one less IRD payment. Your employees can file their income tax return a lot sooner, which means swifter access to things like child support and working for families.”

Iswar says it’s not uncommon for SMEs to try and save money by doing it themselves, but the cost in hours and lifestyle is too high.

“I’d encourage SME owners to take this as an opportunity to also explore other technology solutions like Xero and various timesheet software solutions.

“Keep up with change and add value to your business because you will find that automation actually leads to less scrutiny, less invasion of privacy and less audit pain.”

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